Compound Period

The most important and probably most ignored idea in finance or life is the reality of time.

Compound period is an example of the interaction between an investment, and the time between when the return is compounded back into the principal and reinvested.

For example, a 10% return on investment on $100,000 in capital might be great, or might be awful. And that depends entirely on the factor of time. If it’s in 1,000 years, that’s bad. If it’s in a day, that’s great.

So the shorter the compound period the better, because the faster the capital returned and available to grow the principle. It means you’re able to steepen the shape of the growth curve and achieve things significantly faster because of the reality of a finite time line for humans.

This of course applies to everything in terms of growth rates and how to maximize returns. But one of the biggest applications is in learning. Let’s say you’re in sales, and your manager gives some feedback about a technique you’re using. And they think you would increase your sales by 10% (another $10,000/year in commission!) if you did this.

If you choose to apply it 30 days later because you don’t prioritize it, your compound period is 30 days. That’s not bad especially when most people never apply anything, which means they have an infinite growth timeline and will never live to see it. But let’s say you decide to take rapid action and apply it on day 1, your growth curve is almost straight up.

And because time is limited, you’ve shaved off years of time to reach your goals because now you have the income to invest in more training, which means you have more money to invest in a coach, which means you can afford to fly to that conference, which attracts the offer for a new position… etc.

And it’s all because by taking immediate action, the shape of your growth curve will be dozens of times faster than others. And cause exponentially faster and higher growth.

And of course after only a short period of time, the different outcomes become irreconcilable and the other person will never be able to catch up.

So take immediate action, and don’t delay from applying what you’re learning so that you get the benefits faster, so you can reinvest faster, so you get the benefits faster…

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